US Congress Told Bitcoin Is The ‘Mother Of All Scams’

Bitcoin has received its fair share of criticism from different experts and analysts over the last few years but that hasn’t dimmed its popularity. Bitcoin once again took a beating to its reputation after renowned economist Nouriel Roubini put forward a prepared testimony to U.S Congress where he called bitcoin the ‘Mother of all Scams’.

U.S Congress as well as investors around the world will pay attention to what Roubini says because he was one of the few global financial analysts who was able to predict the financial crisis in 2008. Roubini made his presentation to the U.S. Senate Committee on Banking, Housing and Community Affairs and cautioned them about the scams and financial bubble that bitcoin had caused.

He used bitcoin’s dramatic fall in value from the heights of $20,000 in December 2020 to $6,200 in October as a great example of what he was looking to convey. He said that hundreds of individuals had sought his opinion when bitcoin was at its heights and asked him if they should buy bitcoins.

Roubini said thousands of investors who had no idea about cryptocurrencies were lured into buying bitcoin because they wanted to get rich quick and ended up being scammed, swindled and cheated by crypto scammers. Many analysts on Wall Street have also supported Roubini’s claims against bitcoin but have backed blockchain technology which bitcoin operators on.

Roubini Not A Fan Of Blockchain

While hundreds of financial institutions around the world are embracing blockchain technology for the numerous advantages it offers them, Roubini is not a fan of the blockchain and debunked the technology.

In a statement, Roubini said

Now that the crypto bloodbath is in full view the new refuge of the crypto scoundrels is ‘blockchain’, the technology underlying crypto that is now alleged to be the cure of all global problems, including poverty, famines and even diseases. But as discussed in detail below blockchain is the most over-hyped and least useful technology in human history

His views regarding blockchain technology were debunked by the director of research at Coin Center. Peter Van Valkenburgh said blockchain was by no means perfect but it was an IT breakthrough that will have a positive impact on numerous fields going forward.

Valkenburgh pointed out that e-mail wasn’t perfect when it was invented in 1972 but it was tweaked over the years to become a powerful mode of communication in the 21st century and so will blockchain technology.

Roubini Tells Congress That Bitcoin Is The Mother Of All Scams

Nouriel Roubini, the Economist who predicted a housing market crash that brought about the 2008 financial melt-down, cautioned politicians against Bitcoin. He said that “Bitcoin is the mother of all scams” and blockchain is the most hyped tech ever. The news broke out during Senate hearing on cryptocurrency. With Roubini and Peter Van Valkenburgh, Director of Research at the Coin Center also joining the discussion.

Calling Bitcoin Out

Both economists sounded an alarm regarding the various aspects of digital currency and the asset class. Roubini’s criticism was particularly scathing, although it lacked substance. He noted that “Crypto is the mother or father of all scams and bubbles.” His insight comes after Bitcoin prices declined from $20,000 USD in December 2020. Moreover, he said that the 2020 bubble and its subsequent bust was the first sign. Roubini accentuated his point by saying that everyone “especially by the people with zero financial literacy” were asking him whether to buy Bitcoin or not between Thanks Giving and Christmas last year.

Roubini said that the folks who couldn’t tell the difference between stocks and bonds went into a literal manic frenzy of Bitcoin and Crypto buying. Roubini also said that “blockchain technology is most-over hyped technology ever.” He called it “a glorified spreadsheet or database”.

Questionable Expertise

Roubini’s statement contradicts many blockchain analysts who believe in the potential of blockchain technology, especially those who stated that this disruptive technology could help various organizations. Even government could benefit from it in its tax collection efforts, and other bureaucratic endeavors. The fact that Roubini called it a glorified spreadsheet, shows ignorance about the technology and how it can manage processes in a decentralized manner. In fact, people have been transferring value on blockchain for almost 10 years now.

Roubini not only dismisses the technological prowess of blockchain that apart from creating a system in which the transfer of value can occur without central authority oversight, but he also disregards the importance of the creation of digital scarcity through Bitcoin. This might be because Roubini is a Keynesian and Bitcoin is an asset that suits Austrian School economists much better. In any case, Roubini has the wrong kind of expertise when it comes to most Bitcoin-related matters. The fact that he predicted the housing bubble in 2006, doesn’t mean that he is the perennial canary in the coal mine.

Focus on Price

It is clear that Roubini focuses on price, and criticizes Bitcoin through that very narrow, conventional lens. Bitcoin has indeed fallen by more than 65 percent. This so called “crypto-apocalypse” has the detractors saying, “I told you so.” There were other analysts agreeing to what Roubini has stated about Bitcoin and cryptocurrency but few focused on its technological prowess.

Roubini’s disdain for blockchain technology exposes his narrow view of the world. He states that “Now that the crypto bloodbath is in full view the new refuge of the crypto scoundrels is ‘blockchain’, the technology underlying crypto that is now alleged to be the cure of all global problems, including poverty, famines, and even diseases. But as discussed in detail below blockchain is the most over-hyped — and least useful — technology in human history.” Among Bitcoin and cryptocurrency enthusiasts, there are many that have warned against the blockchain hype. People in the community know that blockchain technology is not the cure for every evil, but mainstream companies like IBM are pushing this idea regardless. Maybe Roubini should set his sights on them, instead of condemning an asset he clearly knows nothing about. Or perhaps, he should focus on the next financial melt down that is brewing as interest rates climb in a world that is addicted to his beloved brand of Keynesian debt.

Tabassum Naiz

Bitcoin is the ‘mother of all scams’ and blockchain is most hyped tech ever, Roubini tells Congress

Global economist Nouriel Roubini, one of the few who predicted the 2008 financial crisis, is making sure United State Senators don’t miss his warning on cryptocurrency.

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Within minutes of testifying at a Congressional hearing on Capitol Hill Thursday, Roubini sounded alarms on multiple aspects of new digital asset class.

“Crypto is the mother or father of all scams and bubbles,” Roubini, also a professor at New York University, told the U.S. Senate Committee on Banking, Housing and Community Affairs at a hearing Thursday.

The self-described expert of international financial markets, asset and credit bubbles and their bust, said the first warning sign came after late last year as bitcoin neared a high of almost $20,000. Roubini told Senators that “literally every human being I met between Thanksgiving and Christmas of 2020” asked him if they should buy cryptocurrency,

“Especially folks with zero financial literacy –individuals who could not tell the difference between stocks and bonds – went into a literal manic frenzy of Bitcoin and Crypto buying,” Roubini said.

In a prepared testimony, Roubini called out “scammers, swindlers, criminals, charlatans, insider whales and carnival barkers (all conflicted insiders)” who he said all tapped into “clueless retail investors’ FOMO (“fear of missing out”), then took them for a ride with pump and pimp schemes for “scammy crappy assets at the peak that then went into a bust and crash – in a matter of months – like you have not seen in any history of financial bubbles.”

Since the height of the frenzy, bitcoin has fallen more than 65 percent, in what Roubini calls “crypto-apocalypse.” The total market capitalization for cryptocurrencies is down by more than 60 percent, according to data from CoinMarketCap.com. Bitcoin dropped 6 percent to a low of $6,125.75 Thursday as the rest of global markets saw their biggest drop since February this week.

Other economists and Wall Street leaders have agreed with Roubini’s assessment on bitcoin. But few have as aggressively spoken out about its underlying technology blockchain. Roubini however sees almost no reason for its widespread adoption.

Blockchain over-hyped

“Now that the crypto bloodbath is in full view the new refuge of the crypto scoundrels is ‘blockchain’, the technology underlying crypto that is now alleged to be the cure of all global problems, including poverty, famines and even diseases. But as discussed in detail below blockchain is the most over-hyped – and least useful – technology in human history,” Roubini said. “In practice it is nothing better than a glorified spreadsheet or database,” he said.

Peter Van Valkenburgh, director of research at Washington-based lobbying group Coin Center, took a starkly different stance. While he acknowledged that it’s not widely accepted as a payment method, Van Valkenburgh said that aspects of it are still promising.

“Is it perfect? No. neither was email when it was invented in 1972,” Van Valkenburgh said. “The mere fact that it works without trusted intermediaries is amazing — it’s a computer science breakthrough. It will be as significant for freedom, prosperity and human flourishing as the birth of the internet.”

Other members of Congress have debated the merits of cryptocurrency in smaller roundtables throughout the fall. In September, House of Representatives members met with industry representatives to address regulatory concerns, and fears of innovation fleeing the U.S. Following that meeting, more than a dozen members of Congress sent a letter to SEC Chairman Jay Clayton, calling for a clearer picture of how the agency views the digital asset class.

Rep. Tom Emmer, R-Minn., said he plans to introduced three crypto and blockchain friendly bills, while Rep. Warren Davidson, R-Ohio, is drafting one to be introduced this fall that he says not yet “fully cooked.”